Deals & People May 12, 2020

Franklin Templeton Details Ambitious Technology Plans

With the acquisition of AdvisorEngine, Franklin Templeton expects to enable its independent adviser partners to efficiently deliver goals-based financial planning at scale—including in the retirement plan context.

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Sitting down for a frank (and remote) discussion with PLANADVISER about the recently announced acquisition of AdvisorEngine, two Franklin Templeton executives said the move is all about the future of mass market financial planning.

“It is a combination of a few trends which inspired this deal,” explains Harshendu Bindal, head of digital strategy and wealth management at Franklin Templeton. “It is the way society is generally moving towards digital platforms and technology-based services. It is the influence of margin compression, and the need among advisers and financial services firms to deliver higher value services at greater scale.”

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Bindal says the onboarding of AdvisorEngine will enable financial advisers working with Franklin Templeton to access and implement the “best-available thinking across portfolio construction and practice management.”

“We are aiming to supply financial advisers with the means to access goals-based investment solutions for their clients,” he says. “It takes a platform like AdvisorEngine’s to deliver this type of valuable service at scale. It’s really not something that can be done offline.”

Yaqub Ahmed, senior vice president and head of defined contribution (DC) and insurance/sub-advisory for Franklin Templeton, echoes that assessment.

“We are working on the premise that the workplace has become the true financial hub of the average American investor,” Ahmed says. “That’s where the assets are being built up, in employer-based plans. How will we leverage AdvisorEngine? It’s about supporting the many DC plan advisers out there who want to extend themselves beyond just the retirement plan. We know that more and more of our adviser partners are working on things like holistic financial wellness, and they want to deliver these services to large groups of people.”

Despite the tremendous work to-date of RIAs serving retirement plans, Ahmed and Bindal say the 401(k) plan market is still somewhat underserved in terms of the availability of tailored and timely financial planning.

“Traditionally, the financial services industry has been hyper focused on delivering these services to the high-net-worth individuals,” Ahmed says. “But, there are so many other people who need access to holistic advice and financial planning tools that they just aren’t getting. We believe this deal will help us help our partners to serve many more people with holistic planning.”

As Bindal emphasizes, Franklin Templeton plans to nurture and support the AdvisorEngine brand and platform—not to “Franklinize” the newly acquired firm.

“We have acquired them for their platform, but also for their expertise and their management team,” Bindal says. “They have a lot of strengths in the area of building and maintaining the technology platform, along with their customer relationship management expertise. We want to enable them to grow. What we bring to the equation is a lot of additional resources and capabilities that can be additive to AdvisorEngine’s efforts.”

Ahmed and Bindal say the culture and vision of AdvisorEngine matches perfectly with this ambition.

“Ultimately, this deal is about delivering tech-enabled platforms to our strategic adviser partners, so that they can extend their firms into the realm of goals-based planning and wealth management,” Ahmed concludes. “I should also emphasize, if it’s not clear already, that this effort in no way means we are trying to disintermediate the role of the adviser as we think about serving investors. Quite the opposite, in fact. It’s all about strengthening and growing our strategic partnerships.”

Compliance May 11, 2020

Iowa Finalizes and Adopts Best Interest Standard for Annuities

“Iowans expect their financial professional to act in the consumer’s best interest when recommending an annuity,” says Iowa Insurance Commissioner Doug Ommen. “Iowa not only expects it, but we will require it.”

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The Iowa Insurance Division late in the day on Monday filed an “adopted regulation” to require annuity agents to act in the best interest of their customers. 

Iowa’s annuity standard builds on efforts by the National Association of Insurance Commissioners (NAIC) to develop a framework Suitability in Annuity Transactions Model Regulation that is harmonized with rulemaking by the U.S. Securities and Exchange Commission (SEC), as well as a public comment period and hearing by the Iowa Insurance Division.

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The regulation adopted Monday includes several important changes relative to the original version published by the Iowa Insurance Division. Most importantly, the Iowa regulation now includes an explicit caveat to the effect that regulated entities that meet the standards prescribed by the SEC’s Regulation Best Interest (Reg BI) will be assumed to be in compliance with Iowa’s regulation.

In a statement accompanying the revised and finalized rule, Iowa Insurance Commissioner Doug Ommen notes that “Iowans expect their financial professional to act in the consumer’s best interest when recommending an annuity.”

“Iowa not only expects it, but we will require it,” he says. “We are very pleased that the NAIC has approved a best interest standard. I hope to also work with other U.S. insurance regulators to require the same of any Iowa insurer writing annuity business in those states.”

Responding to this development, Jason Berkowitz, the Insured Retirement Institute (IRI)’s chief legal and regulatory affairs officer, commends the Iowa regulator for its efforts to harmonize its standards with the federal Regulation Best Interest.

“We congratulate and applaud Commissioner Ommen, Assistant Commissioner [Andrew] Hartnett, and the rest of the Iowa Insurance Division for moving expeditiously to finalize their proposal to adopt the NAIC’s enhanced annuity sales practices model regulation, and for recognizing the need to step back and re-evaluate the proposed best interest standard for broker/dealers,” Berkowitz says. “Given the thorough and transparent process followed by the NAIC to develop a workable best interest standard for annuity recommendations, and the significant leadership role played by Commissioner Ommen in that effort, it is appropriate that Iowa is the first state to formally adopt the updated model. We hope the other states will soon follow Iowa’s lead.”

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